Travelers 2015 Annual Report Download - page 191

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
3. INVESTMENTS (Continued)
Proceeds from the sale of real estate investments were $31 million, $15 million and $18 million in
2015, 2014 and 2013, respectively. Gross gains of $4 million, $6 million and $7 million were realized on
those sales in 2015, 2014 and 2013, respectively, and there were no gross losses. The Company had no
real estate held for sale at December 31, 2015 and 2014. Accumulated depreciation on real estate held
for investment purposes was $320 million and $290 million at December 31, 2015 and 2014,
respectively.
Future minimum rental income on operating leases relating to the Company’s real estate
properties is expected to be $92 million, $74 million, $61 million, $49 million and $36 million for 2016,
2017, 2018, 2019 and 2020, respectively, and $59 million for 2021 and thereafter.
Short-term Securities
The Company’s short-term securities consist of Aaa-rated registered money market funds, U.S.
Treasury securities, high-quality commercial paper (primarily A1/P1) and high-quality corporate
securities purchased within a year to their maturity with a combined average of 67 days to maturity at
December 31, 2015. The amortized cost of these securities, which totaled $4.67 billion and $4.36 billion
at December 31, 2015 and 2014, respectively, approximated their fair value.
Variable Interest Entities
Entities which do not have sufficient equity at risk to allow the entity to finance its activities
without additional financial support or in which the equity investors, as a group, do not have the
characteristic of a controlling financial interest are referred to as variable interest entities (VIE). A
VIE is consolidated by the variable interest holder that is determined to have the controlling financial
interest (primary beneficiary) as a result of having both the power to direct the activities of a VIE that
most significantly impact the VIE’s economic performance and the obligation to absorb losses or right
to receive benefits from the VIE that could potentially be significant to the VIE. The Company
determines whether it is the primary beneficiary of an entity subject to consolidation based on a
qualitative assessment of the VIE’s capital structure, contractual terms, nature of the VIE’s operations
and purpose and the Company’s relative exposure to the related risks of the VIE on the date it
becomes initially involved in the VIE. The Company reassesses its VIE determination with respect to
an entity on an ongoing basis.
The Company is a passive investor in limited partner equity interests issued by third party VIEs.
These include certain of the Company’s investments in private equity limited partnerships, hedge funds
and real estate partnerships where the Company is not related to the general partner. These
investments are generally accounted for under the equity method and reported in the Company’s
consolidated balance sheet as other investments unless the Company is deemed the primary beneficiary.
These equity interests generally cannot be redeemed. Distributions from these investments are received
by the Company as a result of liquidation of the underlying investments of the funds and/or as income
distribution. The Company’s maximum exposure to loss with respect to these investments is limited to
the investment carrying amounts reported in the Company’s consolidated balance sheet and any
unfunded commitment. Neither the carrying amounts nor the unfunded commitments related to these
VIEs are material.
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